Photo of Varun Kannan

Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Varun can be reached at varun.kannan@cyrilshroff.com

Arbitration Act and FEMA

The judgments of the Delhi HC in Cruz City and SRM Exploration, discussed in Part 1, appears to ignore the earlier decision of the SC in Dropti Devi v Union of India[1], where the SC held (in the context of prosecution under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act) that the legislative objectives of FERA and FEMA are identical, namely, preservation of the foreign exchange resources of the country.

Continue Reading Legislative gap between the Arbitration Act and FEMA: Should Parliament step in? – Part II

Arbitration Act and FEMA

Background

India is one of the few countries that still has exchange controls and does not have full capital account convertibility.

The Foreign Exchange Management Act, 1999 (“FEMA”), empowers the Reserve Bank of India (“RBI”) to frame regulations, master directions and issue circulars for the enforcement of the FEMA (“FEMA Regulatory Regime”). The FEMA Regulatory Regime contemplates prior RBI approval for certain categories of capital account transactions between residents and non-residents.

The enforcement of international arbitration awards in India, where there is going to be a remittance of foreign exchange from a resident to a non-resident, would invariably have FEMA implications. FEMA implications may also arise in situations where the foreign award provides for transfer of shares between residents and non-residents. If the foreign award is not in conformity with the FEMA Regulatory Regime, in such a situation, can the court, where the enforcement action is filed, decline enforcement on the ground that the foreign award would be contrary to the country’s ‘public policy’.

Continue Reading Legislative gap between the Arbitration Act and FEMA: Should Parliament step in? – Part I

New ODI Regime

Background

The Ministry of Finance (“MoF”) and Reserve Bank of India (“RBI”) notified the new overseas investment (“OI”) regime on August 22, 2022 (“New Regime”).

The New Regime inter alia comprises the OI Rules, 2022[1] notified by the MoF (“Rules”), the OI Regulations, 2022[2] notified by the RBI and the Master Directions issued by the RBI to authorised persons. It supersedes FEMA 120[3] and the circulars and directions issued thereunder (“Old Regime”).

Continue Reading New ODI Regime: What RBI needs to clarify?

RPT Regulations

Background

SEBI’s amendments to the regulatory architecture for related party transactions (“RPTs”) under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) came into force from April 1, 2022[1] (“RPT Regulations”), bringing about a paradigm shift in the RPT approval and disclosure requirements applicable to listed companies in India.[2]

Continue Reading RPT Regulations – Some Suggestions for SEBI’s consideration

Regulatory overload on Audit Committees

Background

The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (LODR) Regulations, 2015 (“LODR”) places significant emphasis on the functioning of various committees of the Board of Directors (“Board”) of a listed company. While all Board committees have been entrusted with important responsibilities, a disproportionate amount of the regulatory burden has been placed on the Audit Committee. The Audit Committee has multifarious responsibilities under Section 177 and various other provisions of the Act, the LODR, and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).

Continue Reading Regulatory overload on Audit Committees – Is there a need to have a fresh look at its role?

Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test

Background

SEBI[1] has recently revised the materiality threshold for obtaining shareholder approval for related party transactions (“RPTs”) under Regulation 23(1) of the SEBI (LODR) Regulations, 2015 (“LODR”), to cover RPTs that exceed INR 1000 crore or 10% of a listed entity’s annual consolidated turnover (as per the last audited financial statements), whichever is lower.

The revised materiality threshold has come into effect on April 1, 2022, and this change assumes significance, as prior to April 1, 2022, there was no absolute numerical threshold for RPTs that require shareholders’ approval.

This also raises the question as to whether an absolute numerical threshold of INR 1000 crore could potentially be considered as violative of Article 14 of the Indian Constitution.

In this post, the authors aim to probe deeper into this constitutional aspect and examine some of the arguments that can be made from both sides of the spectrum.

Continue Reading Revised threshold of Rs. 1000 Crore for ‘material’ RPTs under LODR – Does it pass the Article 14 test?

Invesco v Zee

In a recent judgment pronounced in Invesco Developing Markets Fund v. Zee Entertainment Enterprises Limited[1] (“Judgment”), on March 22, 2022, a Division Bench of the Bombay High Court (“BHC”) allowed Invesco’s appeal against a judgment dated October 26, 2021[2]. The October 26 judgment was passed by a Single Judge of the BHC (referred to hereinafter as the “Impugned Order”), which had granted an injunction restraining Invesco from calling for and holding an extraordinary general meeting (“EGM”) of Zee.

Continue Reading Bombay High Court’s Judgment in Invesco v Zee– A major boost for shareholders’ rights in India

Information Rights of a Company Director

Background

The fiduciary duties of the directors of a company under the Companies Act, 2013 (“Act”) have been well-recognised in multiple landmark judgments, and in Section 166 of the Act.  Under Section 166(3), a director is required to exercise his duties with reasonable care, skill and diligence, and exercise “independent judgement”.

Continue Reading Information Rights of a Company Director- Does our company law need a relook in the post-pandemic world?

Overseas Direct Investment

Background

Outbound investments in India have witnessed a significant decline from its peak in the golden period of 2005-08. As per the data collated by the Reserve Bank of India (“RBI”), in July 2011, the total outbound financial commitment was at USD 5,478.15 million. This figure has declined over the decade to USD 2,047.79 million in December 2021.

Continue Reading RBI’s proposed regulatory architecture for the ODI Regime – Does it meet India Inc’s expectations?

JV Company’s Board

Background

The fiduciary relationship between a director and the company is among the foremost principles of company law, which was first enshrined by common law courts of equity. The Supreme Court of India (“SC”) first recognised this common law principle in its celebrated judgment in the Nanalal Zaver case[1], which noted that directors can be considered as “trustees” of the company, and “must exercise their powers for the benefit of the company and for that alone”.[2]

Continue Reading Dilemma of a Nominee Director on the JV Company’s Board – Is there a conflict in his fiduciary duties?